If someone mentions peer-to-peer sharing or Bitcoin, you would most likely assume they were talking about the Internet. But what if, instead, they were talking about the future of the electric grid and the utility industry?

By: James McClanahan

The Brooklyn, New York Microgrid is a demonstration project showcasing the interesting concept of a peer-to-peer electricity system. While currently very limited in size with five homes acting as “producers” and five homes serving as “consumers”, the concept may provide a glimpse into a potential twist on the path to the future distribution system.

While “wheeling” electricity over the electric network has been around for almost as long as the grid itself, the idea of relatively small-scale producers and consumers arranging these transactions directly between themselves is new territory. In the Brooklyn Microgrid demonstration, the transaction side is made possible through use of a blockchain network.

Blockchain technology is used for a variety of distributed database applications, but is probably best known for its use by Bitcoin. It provides a method for participating nodes or users to create and track transactions in a way that is secure, auditable, and non-repudiable.

The Brooklyn Microgrid project was developed by LO3 Energy. They relied on blockchain technology from ConsenSys to create what they refer to as the “TransActive Grid”. They are, in effect, demonstrating a local market for electricity. One parallel that might be more familiar is the local farmer’s market. Like the farmer’s market, the TransActive Grid allows electricity produced “locally” to be sold “locally”.

In the demonstration system, solar arrays are installed on the five homes to produce electricity and smart meters provide information about the excess net production available. The blockchain technology allows the producers to add their excess production to a “wallet” and then transfer (or sell) that excess production to another consumer. Currently the exchange only involves the transfer of excess production, but adding some type of pricing mechanism to sell the excess is a logical next step.

This model for the grid is not without issues. The laws of physics are adamant that electricity will take the path of least resistance; so even if a consumer “purchases” their electricity from a generation facility located a thousand miles away, the electricity actually consumed is likely generated at facilities much closer to them. There are also a number of issues such as reliability and stability that, at least today, require the TransActive Grid to be connected to the larger, existing utility grid.

More mature concepts such as community solar are further proof that some consumers have a strong desire to have control (either real or perceived) over how their electricity is produced.

Is this an idea utilities should explore and embrace? Could the larger energy markets also eventually move towards something like a blockchain technology? Is it something that will inevitably march forward on its own like peer-to-peer file sharing?

There is no way to know for certain, but the use of blockchain technology is one of the many emerging developments worth watching in the microgrids space and the utility industry in general. The pace of change and innovation is faster than ever. In this environment, West Monroe can help you build a more robust view of what may be coming and assist you in developing strategies to leverage those insights into business success.

Jim has over 30 years of experience planning, designing, and delivering utility solutions related to telecommunications, SCADA, Distributed Automation, Demand Response, Advanced Metering Infrastructure, and other areas. For more information, please contact him at jmcclanahan@westmonroepartners.com.